Close
Close

Partnerships can amend for PPP loans by Dec. 31

RFP
Tax Hot Topics newsletter The IRS recently issued guidance (Rev. Proc. 2021-50) allowing certain partnerships subject to the centralized partnership audit rules of the BBA to file amended 2020 returns through Dec. 31, 2021, instead of being required to file an Administrative Adjustment Request (AAR). This guidance has been issued to provide procedural rules for eligible BBA partnerships wishing to address issues relating to the forgiveness of Payroll Protection Program (PPP) loans and several other specific items.

Background Rev. Proc. 2021-50 provides that certain eligible partnerships subject to the centralized partnership audit rules of the Bipartisan Budget Act of 2015 (BBA) that filed a Form 1065 and furnished all required Schedules K-1 for taxable years ending after March 27, 2020, but before the issuance of the revenue procedure on Nov. 18, 2021, may file amended partnership returns and furnish amended Schedules K-1 on or before Dec. 31, 2021. Under the BBA, a partnership generally cannot file an amended Form 1065 or issue amended Schedules K-1 to partners. The only way a BBA partnership can ordinarily make an adjustment to a tax return is through the filing of an AAR.

Eligible partnerships include those that need to file amended returns to take into account tax changes under Rev. Procs. 2021-48 or 2021-49. Those revenue procedures concern the tax treatment of the forgiveness of PPP loans, certain grant proceeds, or the subsidized payment of certain principal, interest and fees. While the amended returns must take into account tax changes under Rev. Proc. 2021-48 or Rev. Proc. 2021-49, eligible BBA partnerships may make any additional changes on their amended returns.

Amended return procedures A BBA partnership is not obligated to file an amended return pursuant to Rev. Proc. 2021-50 and may decide instead to file an AAR. If a BBA partnership files an amended return for a period ending after March 27, 2020, it should file form 1065 (with the “amended” box checked) and furnish corresponding amended Schedules K-1 to the partners. The BBA partnership should also write “FILED PURSUANT TO REV PROC 2021-50” at the top of the amended return and attach a statement with each Schedule K-1 sent to its partners with the same notation. The IRS also recommends filing the Form 1065 electronically.

If the BBA partnership is currently under examination, it may file an amended return but only if it gives notice in writing to the examiner that the BBA partnership wishes to use the amended return option.

If a BBA partnership has already filed an AAR for a period ending after March 27, 2020, the BBA partnership must use the items as adjusted in the AAR, rather than the reporting used on the originally filed return.

Next steps A partnership that files an amended return under Rev. Proc. 2021-50 should be aware that the BBA procedures are still in effect. Under Section 6222, a partner’s return must treat partnership-related items consistent with the partnership’s treatment of those items. Accordingly, if the BBA partnership files an amended return, the partner should ensure that the treatment of those items is still consistent, and if not, the partner should consider filing an amended return, or risk a computational adjustment by the IRS.

BBA-related procedural issues can be complex, administratively burdensome, and result in unexpected consequences for both partnerships and partners.

For more information, contact:
Buck Buchanan
Managing Director
Washington National Tax Office
Grant Thornton LLP
T +1 404 704 0146

Patrick Wade
Senior Manager
Washington National Tax Office
Grant Thornton LLP
T +1 312 602 8733


Tax professional standards statement
This content supports Grant Thornton LLP’s marketing of professional services and is not written tax advice directed at the particular facts and circumstances of any person. If you are interested in the topics presented herein, we encourage you to contact us or an independent tax professional to discuss their potential application to your particular situation. Nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein. To the extent this content may be considered to contain written tax advice, any written advice contained in, forwarded with or attached to this content is not intended by Grant Thornton LLP to be used, and cannot be used, by any person for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.

The information contained herein is general in nature and is based on authorities that are subject to change. It is not, and should not be construed as, accounting, legal or tax advice provided by Grant Thornton LLP to the reader. This material may not be applicable to, or suitable for, the reader’s specific circumstances or needs and may require consideration of tax and nontax factors not described herein. Contact Grant Thornton LLP or other tax professionals prior to taking any action based upon this information. Changes in tax laws or other factors could affect, on a prospective or retroactive basis, the information contained herein; Grant Thornton LLP assumes no obligation to inform the reader of any such changes. All references to “Section,” or “§” refer to the Internal Revenue Code of 1986, as amended and all “Treas. Reg. §” references are to the Treasury Regulations promulgated under the Code